The proposals unveiled by Tax Commissioner Frits Bolkestein would harmonise the value-added-tax information firms must include on invoices – and end the confusing array of different requirements from country to country.

They would also make it legal for companies to invoice customers across the EU electronically in a bid to slash the paperwork that costs firms billions a year in administration and postal charges.

But to be legal the invoices must bear a valid ‘electronic signature’ of the sender, which the receiver and his local tax authorities would have to recognise for VAT accounting purposes.

Tax experts from a coalition of 18 international firms, including ABB, Cisco, Deutsche Post and Procter & Gamble, claim this requirement would offset any potential cost-savings by forcing firms and customers to retool their technology.

“Putting this as a requirement on VAT is too burdensome from a practical point of view,” said Ine Lejeune, chair of the e-business Tax Group and leading e-business partner for accounting firm PricewaterhouseCoopers, adding that forcing firms to use e-signatures would lead them to rely on old-fashioned paper invoices.

“The alternative would be to follow the Swedish, Danish and Finnish model where an invoice is a digitised form acceptable from a VAT point of view without the additional requirement of a signature.”

Lejeune says industry is likely to adapt voluntarily to e-signatures when the time is ripe. “The cost of handling an invoice [on paper] can be as much as 25 euro a transaction,” she said.

However, if firms were not forced to use e-signatures as part of the new digitial system, “some would save several hundred-thousand-euro a year, others millions. Each industry has different cost implications but overall you would see something like a 75% saving.”

Bolkestein touted the proposals last November as a way to “enable firms to benefit fully from the opportunities offered by the Internal Market and new technologies.” He said the new rules would “cut their administrative costs appreciably and thus increase their competitiveness”.

Under EU rules governing tax issues, the directive needs the unanimous support of member states to become law. Euro MPs can give their opinion on the proposals but their view is non-binding.